Time-adaptive high-order compact finite difference schemes for option pricing in a family of stochastic volatility models

7 Pages Posted: 22 Jul 2021

See all articles by Bertram Düring

Bertram Düring

University of Warwick - Mathematics Institute

Christof Heuer

University of Sussex - School of Mathematical and Physical Sciences

Date Written: July 20, 2021

Abstract

We propose a time-adaptive high-order compact finite difference scheme for option pricing in a family of stochastic volatility models. We employ a semi-discrete high-order compact finite difference method for the spatial discretisation, and combine this with an adaptive time discretisation, extending ideas from [LSRHF02] to fourth-order multistep methods in time.

Keywords: Option Pricing, time adaptivity, High-Order Compact Finite Differences, Stochastic Model

JEL Classification: C63, G13

Suggested Citation

Düring, Bertram and Heuer, Christof, Time-adaptive high-order compact finite difference schemes for option pricing in a family of stochastic volatility models (July 20, 2021). Available at SSRN: https://ssrn.com/abstract=3890159 or http://dx.doi.org/10.2139/ssrn.3890159

Bertram Düring (Contact Author)

University of Warwick - Mathematics Institute ( email )

Zeeman Building
Coventry, CV4 7AL
United Kingdom

Christof Heuer

University of Sussex - School of Mathematical and Physical Sciences ( email )

Brighton, BN1 9QH
United Kingdom

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